General Motors To Slash Outsourcing In IT Overhaul

gManZboy writes "GM's new CIO Randy Mott plans to bring nearly all IT work in-house as one piece of a sweeping IT overhaul. It's a high-risk strategy that's similar to what Mott drove at Hewlett-Packard. Today, about 90% of GM's IT services, from running data centers to writing applications, are provided by outsourcing companies such as HP/EDS, IBM, Capgemini, and Wipro, and only 10% are done by GM employees. Mott plans to flip those percentages in about three years--to 90% GM staff, 10% outsourcers. This will require a hiring binge. Mott's larger IT transformation plan doesn't emphasize budget cuts but centers on delivering more value from IT, much faster--at a time when the world's No. 2 automaker (Toyota is now No. 1) is still climbing out of bankruptcy protection and a $50 billion government bailout."

Comments

In-house staff do have advantages

[Calibax]

In-house staff provide a number of advantages:
        Quicker response from people who actually work for the same orgainzation
        Dedicated staff rather than whoever is free at the moment
        Familiarity with how your business operates
        Longer term institutional memory

Which taken together provide long term cost savings, mostly because you are investing in your own resources.

At least you are less likely to be training someone who will be working for your competitor on his next project.

Re:In-house staff do have advantages

[ackthpt]

In-house staff provide a number of advantages:

        Quicker response from people who actually work for the same orgainzation

        Dedicated staff rather than whoever is free at the moment

        Familiarity with how your business operates

        Longer term institutional memory

Which taken together provide long term cost savings, mostly because you are investing in your own resources.

At least you are less likely to be training someone who will be working for your competitor on his next project.

Smart, smart move by GM, who I do not often credit with making many. As a victim of outsourcing a couple times, I've seen how outsourcers operate - bring in the Crash team, of sharp, smart people, who gradually are rotated out to the next Crash site, while rotating in people with little to no experience who spend their days peering over the shoulders of others trying to figure out what they are supposed to be doing (and once they have it figured out to some degree, they leave their employer for a wage they can actually live on.)

Re:In-house staff do have advantages

[dkleinsc]

Another big advantage: No middle-men.

The way that IBM makes money managing GM's IT infrastructure is to pay their people less than GM paid IBM, say 25% less. So if you're GM, you can go to the guys who are currently doing your work and getting a paycheck from IBM, and say "Hey, how would you like a 15% raise to work for us doing the same job you've been doing all along?", get a lot of people to say "Great deal!", and you've just gotten a 10% cost savings.

Re:In-house staff do have advantages

[Raistlin77]

10% cost saving which you will likely need to help your new potential employees fight their non-compete contracts with the employer that you just poached them from. And possibly to fight your own lawsuit for poaching them in the first place. Outsourcing firms are typically fully aware of the possibility of losing their mostly underpaid workforce to their clients. Most have non-competes in place for this very reason.

Re:In-house staff do have advantages

[ackthpt]

> Smart, smart move by GM, who I do not often credit with making many.

Don't forget the history here. GM used to own EDS, and it pretty much functioned as their internal IT org.

And I had many friends look them over, even going so far as to interview, just to test the waters. They'd pay high, but you had to shave all facial hair off and dress exactly as their code dictated. After a probationary period they cut those they didn't see fitting in - which meant you ended up with a bunch of conformists who wouldn't take a risk, by pointing out something may not have been a good idea or there was a weakness in a plan somewhere. Good ol' Ross Perot - run a company like the army.

Re:In-house staff do have advantages

[Anonymous Coward]

Posting A/C because I'm still working at HP...

Mott was the king of cost cuts. When I started at HP in 2001, HP IT was awesome -- call a number, get an American tech who had a clue. They would even come to your desk, if necessary. Mott "transformed" IT by:

-Laying off lots of IT workers
-Forcing most of the remaining IT workers to move to a single location in Texas, or be fired. No telecommuting allowed
-Making it impossible to purchase any software not on a short "approved" list. Even if it was $20
-Requiring almost all IT issues to be entered into a web-based ticket system -- an overloaded system that was often slow or down
-Limiting telephone support to nearly nothing. Login screens directed employees to "use a co-workers PC to enter a ticket"
-Requiring users to categorize their own tickets. However, the categories were impossible to decipher and I estimate well over 50% of tickets were mis-categorized. Further, mis-categorized tickets were summarily closed as "Resolved" with no hint on what the correct category might be. Further, even if you categorized your ticket correctly, but the level 1 tech didn't find your issue in his checklist, your ticket was closed as "Resolved" -- even though they had NOT resolved your issue.
-Eliminated desk-side support, forcing 6-figure engineers and managers to do time-consuming IT tasks such as re-imaging rather than paying less expensive IT staff to do the same thing. Further, for hardware failures they shipped you a new PC via UPS/FedEx so you had no working PC for several business days.

I'm sure all these things saved a ton of money -- for IT. However, it cost the various other HP business units giant wads of money in lost productivity. Since the productivity didn't show up on IT's cost sheet, it didn't matter to Mott.

Re:In-house staff do have advantages

[theshowmecanuck]

And like some people keep trying to drill into other peoples' heads here, business isn't about facial haired, espresso swilling ping pong playing computer hackers coming up with gee wiz bang frameworks. Business is in business to make money. GM isn't a software company. They want reliable un-sexy computer systems that help them get business done. Hiring highly individual IT people who tend to do things like drop new code bases on production servers without telling people because they read a cool article on some web site isn't what they want. They want people who can write code good enough to let them do business. And that is easily maintainable (something that using flavour of the day frameworks that will disappear quickly and will puzzle the hell out of people who have to program this weird shit 15 years from now). GM is not a software company. Sure they need to create some system software, but the majority will be bought and then maintained in house.

Re:In-house staff do have advantages

[Anonymous Coward]

Nope, I predict an "insourced" but "offshored" branch will be opening soon wherever labor is cheapest.

Re:In-house staff do have advantages

[rolfwind]

They got their ideas about IT from playing golf with other CEOs.

This is the downside to "professional" CEOs, people (MBAs) who train to be management and nothing else. Never worked in the company before, doesn't understand the business, but they sure can juggle the numbers as if the pieces of paper told the whole story.

Which ups my admiration for the Steve Jobs/Bill Gates of the world who pretty much built it from the ground up and is in there real nitty gritty, or even Warren Buffett, who at least learns what he buys from the inside out and usually leaves the functioning parts the fuck alone.

Re:In-house staff do have advantages

[Shoten]

There's a deeper side to this. Back when EDS was still EDS, they were doing a pretty good job for GM. The problem is, HP bought them, and started to apply the same goals/metrics to the services side (formerly EDS) that they use for the product side (that was losing money, and makes fucking printers in the first place). Side note: here is where my self-control keeps me from using terms like "fucking incompetent faggots" and "galactic assclowns" to describe the piss-chugging buttmonkeys that displaced EDS' leadership. As a result, the quality of service that GM got dropped...and the value proposition of outsourcing went with it.

Now, in all fairness, the fact that HP's leadership couldn't figure out how to get wet if they were dropped in the middle of the ocean is probably only part of the problem. Their ass-pounding mediocrity is probably also compounded by the current political situation and the drive to bring jobs back to the USA. So it's not entirely the fault of a bunch of circle-jerking sycophantic pole-chain-smokers. Just 99.99% their fault.

Guess who I used to work for before I quit? :)

Re:In-house staff do have advantages

[MITguy21]

... They'd pay high, but you had to shave all facial hair off and dress exactly as their code dictated. After a probationary period they cut those they didn't see fitting in - which meant you ended up with a bunch of conformists who wouldn't take a risk, by pointing out something may not have been a good idea or there was a weakness in a plan somewhere. Good ol' Ross Perot - run a company like the army.

I was working in a mechanical test lab (as a frequent guest) when EDS first appeared at GM -- mid 1980's. A bunch of idiots with brush cuts tried to take over the engineering computing as well as the business computing. Went around putting EDS stickers on anything that looked like a computer. What a disaster, took a year or more to throw them out and get the dedicated real-time control systems back working properly. This may explain (in part) why GM's car engineering got such a bad reputation back then. Plenty of smart GM employees that were not able to do their job.

Re:In-house staff do have advantages

[gweihir]

They got their ideas about IT from playing golf with other CEOs.

This is the downside to "professional" CEOs, people (MBAs) who train to be management and nothing else. Never worked in the company before, doesn't understand the business, but they sure can juggle the numbers as if the pieces of paper told the whole story.

Which ups my admiration for the Steve Jobs/Bill Gates of the world who pretty much built it from the ground up and is in there real nitty gritty, or even Warren Buffett, who at least learns what he buys from the inside out and usually leaves the functioning parts the fuck alone.

Actually, the problem is not the "numbers juggling". It is that they are incompetent at juggling numbers. The numbers, when looked at carefully, say that outsourcing for IT is a losing game and a huge risk in addition (except in a few rare cases). The problem is IMO, that the MBA types deep down know that they cannot do anything well and compensate by treating everybody as inferior. As IT people do not push back (they typically consider this game infantile and stupid, and rightfully so), they get plowed under. That means that first the good ones leave, refusing to play these stupid games, then the mediocre ones leave a bit later and finally only the duds remain.

The second effect I see is that the MBAs very keenly feel their inferiority to competent IT people and hence try to move them as far away as possible, best into other companies or even out of the country. Stupid, but all too human and what is bound to happen when you put big egos with little skill in charge.

I think what the MBAs really cannot get their head around to is that they are only support and help for those doing the actual work. They somehow think they are leaders and strategic thinkers, when in fact they are just bean-counters without any insight into the problems they are "managing". My impression is that that the MBA is fundamentally flawed insofar as MBAs are being taught that they are more important than those understanding the actual problems. Possibly an effect of all the competing MBA programs stemming from marketing, i.e. the "Do an MBA with us and you will be a highly respected leader". That is the wrong approach and cannot work well.

On the plus side, there is a (still small) counter-movement: Evidence-Based Management. Of course the MBAs are not equipped emotionally and intellectually to practice that, so it will be a long and bloody battle. But without it we will see enterprises fail because their IT has become too dysfunctional.

Re:In-house staff do have advantages

[rhsanborn]

I worked for a while in state government. The IT department had established metrics for all products and services. If the Treasury department wanted a new PC (and the associated management, imaging, desktop support, etc) there was a fixed cost for that, and the Treasury department paid IT for the services it performed. This has a lot of administrative overhead, but it means that "IT" isn't a cost, they actually generate revenue. It forces the consumers of IT to justify their expenses. IT is in a terrible position having to describe why we spent XX amount of money on this particular system, or why we own this many PCs. They ought to be involved in finding out, but the users of the technology need to be involved and need to justify their own use of technology, and aid in making decisions about necessity.

Just about time

[mwvdlee]

It's been about 5 years or so since all IT was outsourced.
We're right on time for managers to start the in-house cycle again.
Good luck in the next 5 years and see you all again on the jobmarket in 2017!

Re:Just about time

[gmanterry]

I worked for a large electric utility in IT. We had to submit competitive bids against private companies to provide IT service. We usually were under bid and the IT contract was awarded to an outside company. Usually the service the utility received from the IT people they hired was good at first but soon the response started to slow. Now, when you have customers coming in the front door trying to pay bills and the customer service rep's computer is down, that is the worst of the worst scenarios. I makes an unhappy customer and no way to easily collect payment from the customer. Five or more customer service reps without the tools to do their job is not good. A few times like this while having to wait for the contract IT guys to show up, usually underscores to management the value of having in house people who are able to respond immediately. So like someone said, it went in cycles. In house - contract - in house - etc. They figure when times get tough that they'll take the savings, until the service just gets too bad and the the multivibrator of management flips again.

Slash Outsourcing

[Spad]

I presume that Slash Outsourcing is Slashdot's latest unwanted "channel" to go with that Business Intelligence nonsense?

Re:more like 7th largest automaker!

[Aphonia]

Uh...: http://en.wikipedia.org/wiki/Automotive_industry#Top_vehicle_manufacturing_groups_.3Cby_volume.3E (which does put Toyota #1 and GM #2)

If you had bothered to read the article you copy-pasted that from, "Volkswagen has retained its place as the number one car company in the world, according to the Forbes Global 2000 companies survey.
The report ranks the world’s biggest companies across an equal weighting of sales, profits, assets and market value. The result is a company ranking in order of size, with 66 countries represented in the mix." (http://news.drive.com.au/drive/motor-news/rankings-worlds-biggest-car-companies-20120420-1xc14.html)

Think of the brands VW owns versus the brands that GM owns.

Hooray!

[DCFusor]

I'm a GM guy, FWIW, and I own a Volt, which I loved at first, and now I love more - it grows on you, especially when you can charge it off solar power. But...the GM web presence is the absolute worst written software I've ever experienced on the web - and I've been here since the BBS days.

I'm thinking specifically about the MyVolt site. Ok, it's mostly a bunch of ads and info on the Volt - obviously mainly motivated by brain-dead marketing, since it's also the main place owners go to check their car's status.

So, you push the log in button. Though there's room on the page, oh no, we have to pop up a window to log in on - meanwhile, the animations on the page behind are still loading and running blocking code that makes my other web apps stutter. After maybe 10 seconds, you get the log on window, with it all filled in (thanks firefox) and click the log in button....and you wait, and wait, and wait. Meanwhile, the button you clicked doesn't grey or disable, and clicking it again breaks it. Finally, you're logged in and it starts trying to talk to the car to see what the state of charge is for you. This takes at least two minutes, often ending in "we failed to contact the car, try again?". During those two minutes, it's busy drawing an animation of the state of charge, in blocking code, so my other realtime (stock trading and TV) apps stutter. And, if there was already valid info on the SOC meter, it gets wiped up while you are waiting. It can take over 5 minutes to find out state of charge on this app! Every single page element is reloaded from scratch and re-initialized in response to every single user action, often wiping out valuable data you had already showing each time. And yes, it logs you out every 30 min - during which time you may or may not have gotten the data you wanted. This site must hit 5-6 different (all slow) servers for each redraw. It's obviously done by drag-drop-monkey tools by someone who doesn't even know how to do that, plus a lot of pretty but useless art from some marketing idiot - owners don't need to see more crappy ads for something they already own (are you listening too, Amazon?).

Anything, and I mean even a site writen by a 13 year old retard who was the nephew of a GM exec would be superior. Thank god, the Volt runs linux in a cluster...that was done mostly inhouse and by IBM, who at least have a clue.

Wal-Mart doesn't outsource their IT

[rollingcalf]

And they are the king of cost-cutting. They outsource many other things, but still insist on keeping their IT in-house.

Re:Wal-Mart doesn't outsource their IT

[sapgau]

+1
Wall Mart is the case study for Business Intelligence, Data warehousing, Data Mining, etc... They analyze every little trend in their inventory, sales, customer traffic, etc.
I remember reading one time they placed beer next to diapers during the week at night because that's was when young dads make a quick run to restock, coming out with diapers in one arm and a six pack on the other.

There is no way you can outsource that and remain competitive.

Not high-risk at all

[WindBourne]

What was high-risk was outsourcing to the likes of IBM, HP, CapGemeni, wipepro, etc. who outsource the work to India or China. That information is then able to be used against GM. Real stupid on GM's part.

Re:Design Flaw?

[spire3661]

Michigan is roughly as big as the U.K., maybe that will bring some perspective.

Re:Design Flaw?

[Darth_brooks]

Let's start with all the stuff you missed:

-As the google map flies, it's 289 miles from the D to the Big Mac. It's about 600 to NYC. (Although it is about the same distance from Detroit to Ironwood, MI, which sits on the Michigan / Wisconsin border. )

-Consumers Power handles most of the non-DTE grid space. DTE's western border is about 20 miles from Ann Arbor's west side

-During the Northeast blackout, plenty of (I dare say most of) the DTE grid went down. The cutoff was where the grids switched over in either Flint of Jackson. We were back online a little faster than most places, but we were down for 24+ hours.

Re:more like 7th largest automaker!

[Malc]

No they're not. VW are crushing everybody at the moment, in terms of units sold:
http://www.economist.com/node/21558269

It's how you want to go when you are large

[Sycraft-fu]

You only outsource general functions like IT, payroll, maintenance and so on when you are small enough that it makes economic sense to do so. When the amount and kind of service you need is such that it would cost more to employ people in house than to outsource it, you do. However when you get large, it is silly to outsource. You can get it cheaper in house since you are large enough to need the equivalent of many full time people working for you, and if they are outsourced it is just another layer of cost.

A small business of 5 people? Ya you probably want to outsource IT needs (and other stuff). It would be infeasible to hire an IT person and have 17% of your staff be IT. A company of twenty thousand people? Don't outsource it, you will need a hundred plus IT people anyhow, might as well have them work directly for you.

Re:It's how you want to go when you are large

[rhsanborn]

The other benefit is that you get not only people running your IT infrastructure, but you can likely leverage those people on your product lines. Want to integrate cars with phones? Maybe you should go pull some talent from the group that is doing other app development, etc. It gives you in-house talent to move into new and interesting areas.